HENRY SCHEIN || THE 2025 INTERACTIVE PLAYBOOK TO BUILDING YOUR DENTAL PRACTICE
6. SECURE THE BEST FINANCING
There are many factors to consider in determining how to finance your practice. Choosing the right financing partner not only helps dictate if you are able to obtain financing, but also how much you may be approved for and how smoothly the process will go. Most importantly, talk with a lender that has dental-specific experience and subject matter expertise. Ask them about their approval limits, the length of their terms, graduated repayment programs and what collateral they will require.
Additionally, discuss their ability to assist you with developing a business plan with a budget and what adjustments can be made if that budget changes over time or during your buildout. Most dental-related lenders will provide you with a specific allocation of funds broken down between hard costs (dental equipment) and soft costs, so knowing and staying within your budget is critical.
To ascertain a potential loan amount, the lender will consider many factors, including your credit history, personal net worth, liquidity (cash available), time licensed and production ability. Your business plan, budget and cash flow projections may also factor into the amount you are approved for.
“Many banks want as much collateral (hard assets like real estate) as possible. You need to know how that will impact your borrowing power,” says Natalie Westfall, vice president of Henry Schein Financial Services, a leading source of project and equipment financing. “If the bank lumps your practice and your real estate together, that impacts your debt exposure. Having your real estate and practice loans handled by separate banks can help preserve your borrowing power, particularly if you plan to have multiple locations.”
Be sure to bring your financial adviser into the conversation. They can provide an objective view of your income stability, as well as the production stability of the region. They can also help you take advantage of tax benefits of purchasing depreciable assets, such as equipment and software.
GETTING STARTED:
If you’re considering purchasing a property:
- Talk with your tax adviser about any tax implications of doing so and the significant corporate structure setup and ongoing costs to do this.
- Be sure you understand the risks and liability that come along with owning the property. To reduce personal risk, keep your real estate holdings and dental practice corporation as separate legal entities.
- Talk with your financial adviser about the long-term implications of the purchase, as it can often be difficult to find a buyer for both the dental practice and the commercial property where the practice resides.
- Have a well-structured dental lease between the two legal entities, regardless of ownership.
- Be careful tying up your access to capital. Have you ever wondered why many DSOs do not own any real estate? The answer is simple: there can be a much greater return from opening another dental office or two, rather than tying up your cash in a building that anyone can own.